House Passes Ban on Tax Strategy Patents

Posted on: September 13th, 2007

On September 7, the U.S. House of Representatives passed H.R. 1908, The Patent Reform Act of 2007. Section 10 of that bill prohibits patenting tax strategies. While the bill prevents future patents on tax strategies it is neutral on the validity of patents that have already been issued.

Some tax strategies have already been patented, including one dealing with funding a Grantor Retained Annuity Trust (GRAT) with stock options. The owner of that patent actually sued someone who used the technique without obtaining permission. Several other patents involving charitable gifting strategies have been submitted to the Patent Office – assuming the bill becomes law, those should be stopped.

This bill is good for both for taxpayers and tax professionals, preventing undue restrictions on the ability to adopt tax-saving techniques.

Click here to access the text of the bill. The ban on tax patents appears on pages 55 through 57.